Rio’s Alcan: More Pain, Then Gain?

Despite efforts to put the ill-fated 2007 acquisition of Alcan behind it, the continued weakness in aluminum prices hints at yet another hefty impairment this year for Rio Tinto.

Analysts who met this week with Phillip Strachan, chief financial officer of the Rio Tinto Alcan division, say he conceded that consensus valuations are significantly different to the company’s book value for aluminum.

Investec’s compilation of analysts’ valuations indicated a US$10 billion reduction in the value of the aluminum assets over the past year, while JPMorgan’s Lyndon Fagon said Rio Tinto’s US$27 billion book value for aluminum is almost double his bank’s US$14 billion net present value estimate.